Landowner Options

Landowners Have Many Options

Land can be preserved while you retain ownership, or it can be donated or sold to a qualified conservation organization or the town. Charitable contributions of land or easements may offer significant financial benefits to you or to your heirs.

Below is an introduction to various land protection methods. We’d be happy to discuss these with you further, and strongly recommend that you also consult with a lawyer and/or accountant with land protection experience. The Washington County Land Trust Coalition may provide a free consultation with a lawyer or accountant.

Continuing to Own Your Land

  • Conservation Easement
  • Mutual Covenant
  • Long Term Lease
  • Management Agreements (Term Conservation Easement)

Selling Your Land

  • Sale at Full Market Value
  • Bargain Sale
  • Installment Sale
  • Sale / Donation with a Reserved Life Estate

Donating Your Property

  • Outright Donation
  • Donation by Will
  • Quid Pro Quo
  • Gift of Other Properties (Trade)

Restricting Future Use, Before You Transfer Title

  • Conservation Easement
  • Deed Restrictions
  • Conditional Transfers with Reverter Clause
  • Charitable Remainder Unitrust

Continuing to Own Your Land

Conservation easement

  • Enables the land owner to protect the land in perpetuity while retaining ownership by placing restrictions on the property that legally bind present and future landowners.
  • Restricts or prohibits activities in order to protect the land, plants, and animals. It is created to suit your needs and desires.
  • May be placed on all or just part of the property
  • The holder of the easement will be responsible for long-term enforcement.
  • This reduces property taxes
  • This reduces future estate and inheritance taxes
  • The easement (development rights) may be donated or sold to a qualified public or private conservation organization or town.
  • If sold, the amount received would be taxed by the IRS as a taxable gain
  • If donated, the amount can be claimed as a charitable contribution, if certain conditions are met

Mutual Covenant

  • A permanent agreement between neighboring property owners controlling the future use of their lands through restrictions accepted by all the participants.
  • A person or group of people enforce the restrictions
  • May reduce property and estate taxes
  • Loss in market value can not be claimed as a charitable deduction on income taxes
  • An example is Common Open Space in a planned neighborhood.

Long Term Lease

  • A rental agreement for a specified time
  • An attractive option if you do not wish to permanently transfer land to a conservation organization, but are willing to have the land managed for conservation purposes.
  • Allows unrestricted and exclusive use by the leasing agency
  • Not a charitable donation
  • May effect the property’s value for estate tax purposes

Management Agreements (term Conservation Easement)

  • A legal contract between the owner and a conservation organization, for a given time
  • Lists management goals for the land and responsibilities of both parties
  • A conservation organization may assume some stewardship responsibilities in exchange for the legal protection afforded by the agreement, that the land will be managed for specific conservation goals

Selling Your Land

Sale at Full Market Value

  • Selling property at current retail sales price
  • Some organizations can afford to pay full retail, many can not
  • If it has appreciated since it’s purchase, you will be liable for income tax on the capital gain. This can significantly affect your net profit

Bargain Sale

  • A great method to preserve your land and end up with the same amount of money in your pocket as you would selling it for it’s full retail sales price
  • Selling property to a conservation buyer at less than current retail sales price (fair market value)
  • This will increase the likelihood of finding a conservation buyer
  • You may claim a charitable donation for the difference between the sale price and fair market value, as documented by an appraisal acceptable to the IRS
  • This deduction, together with the smaller capital gain to be taxed, will offset some or all of the loss caused by the reduced sale price

Installment Sale

  • Sale of property over several years
  • The seller benefits financially by spreading the income and taxable capital gain over several years
  • The use of the land and the payment of property taxes until the sale is complete are negotiable terms of the agreement

Sale / Donation with a Reserved Life Estate

  • A reserved life estate insures that your land is accepted by a conservation organization suitable to you
  • Is protected in perpetuity
  • You and the members of your family (if you wish) may live there and retain the use of all or part of the land during your and their lifetimes
  • You donate a remainder interest in the property to a conservation organization
  • Property taxes should be reduced
  • The owner has the obligation to pay taxes and maintain the property during his lifetime. Other obligations may be included in the agreement.
  • The gift may qualify as a charitable gift with tax savings. This is determined by the IRS actuarial tables based on the life expectancy of the tenants.
  • These tax advantages are less than with an outright gift.

Donating Your Property

Much of the land held by private conservation organizations in RI has been donated by generous property owners

Outright Donation

  • Giving your land to a qualified conservation organization or a government agency is the simplest way to protect your land in perpetuity
  • Insures long term protection of your land according to your wishes
  • Relieves the owner of management responsibilities and payment of taxes
  • The value of the land (by an IRS approved appraisal) is a charitable donation
  • Capital gains tax is avoided

    Donation by Will

  • Donating your land to a qualified conservation organization or a government agency by way of your will
  • Entitles you to retain full use and control of your land during your lifetime
  • Discussing this with the recipient organization allows for a development plan to be prepared for the future care of your property and a smooth transition of stewardship
  • Removing land from your estate reduces the estate or inheritance taxes, eliminating the potential stumbling block to preservation of the land by your heirs, depending on the value of the land and the size of your estate.
  • You will be responsible for paying of property taxes, etc. during your lifetime

    Quid Pro Quo

  • Donate or sell a portion of your land
  • Retain a portion of your land for developement

Gift of Other Properties (Trade)

  • If you have other property (houses, house lots, commercial property) that you would like to donate to a conservation organization.  You may also donate other assets such as stocks, bonds, etc.
  • The property may be accepted, with the understanding that it is a “trade”, to be resold, and the money used to purchase desirable conservation property or easements.
  • You enjoy the full tax benefits of the charitable donation and inheritance tax savings by removing the property or other items from your estate

Restricting Future Use, Before You Transfer Title

Whether by sale or donation, the outright transfer of land without strings attached is easiest.  Occasionally you may want to limit the use of the land.  This can be accomplished by attaching conditions to the title transfer

    Conservation Easement

  • If you are selling the land on the open market you may wish to attach a conservation easement prior to the sale to protect the natural characteristics of the property.  The easement only is donated or sold to a conservation organization that will monitor and enforce the restrictions
  • The easement is in perpetuity

    Deed Restrictions

  • Also restricts the use of the property
  • Weaker than a conservation easement
  • You are the enforcer if the new owner does not voluntarily follow the restrictions. This can be difficult if you do not live nearby
  • A deed restriction is not in perpetuity
  • Deed restrictions may decrease the market value if they significantly limit the development potential of the land, or decrease the value of a later gift
  • To insure enforcement, transfer the land to a conservation organization without the restriction, but with the understanding that the group will include the deed restriction before they resell the property.  This way the conservation group becomes the enforcer of the deed restrictions, not you.

     Conditional Transfers with Reverter Clause

  • A deed restriction with power
  • Includes a clause that if the restrictions are violated the property is returned automatically to the original owner, his heirs, or a conservation organization
  • This may reduce the tax savings of the gift
  • It is better to transfer the property to a conservation organization without restrictions, then allow them to attach the restrictions or easements.  This way you receive the full taxable value and the property is protected

     Charitable Remainder Unitrust

  • Place a CE on the land, then place the land in a trust.
  • The trustee sells the land and invests the proceeds.
  • Beneficiaries receive payments for a term or life.
  • The remaining funds are then turned over to a land trust.

 

Permanent link to this article: http://lcnk.org/?page_id=73

 

Please log in to vote

You need to log in to vote. If you already had an account, you may log in here

Alternatively, if you do not have an account yet you can create one here.